THE EFFECTS OF OWNERSHIP CONCENTRATION ON PERFORMANCE OF PAKISTANI LISTED COMPANIES
AbstractThis paper analyzes the effects of ownership concentration on investment performance in a large sample of Pakistani publicly-listed companies from 1997 to 2007. Special attention is directed to statistical methods from the field of panel-data econometrics, which are able to deal with endogeneity problems and with structural reverse causality. The preferred estimator that is based on firm fixed effects insinuates that the voting rights of ultimate shareholders affect Tobin’s q unambiguously negatively, whereas the squared voting rights affect it unambiguously positively. This implies a U-curved relationship between Tobin’s q and voting rights concentration with a turning point at 45%. More than 75% of the companies fall in the upward sloping part of the curve. While positive incentive effects are at work in Pakistan, financial market development is retarded by the reluctance of minority shareholders facing dominant shareholders to hold small stakes in listed companies. Consistently, institutional shareholders do not yet provide a positive monitoring role in Pakistan.
Almeida, H., & Wolfenzon, D. (2006). A Theory of Pyramidal Ownership and Family Business Groups. Journal of Finance, 61: 2637-2680.
Burkart, M., & Lee, S. (2008). One Share- One Vote: The Theory. Review of Finance, 12: 1-49.
Demsetz, H., & Lehn, K. (1985). The Structure of Corporate Ownership: Causes and Consequences. Journal of Political Economy, 93: 1155-1177.
Farooque, O. A., Zijl, T. A., Dunstan, K. & Karim, A. K. M. (2007). Corporate Governance in Bangladesh: link between Ownership and Financial Performance. Corporate Governance: An International Review, 15: 1453:1468.
Hamilton, L. C. (1992). Statistics with Stata. Canada: Duxbury.
Haniffa, R., & Hudaib, M. (2006). Corporate Governance Structure and Performance of Malaysian Listed Companies. Journal of Business Finance and Accounting, 33(7) and 33(8): 1034-1062.
Jensen, M. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, American Economic Review, 76: 323-329.
Javed & Iqbal (2008). Ownership Structure and Firm Performance: Evidence from Pakistan’s Manufacturing Industries. Working Paper; Quaid-e-Azam University, Pakistan.
Joh, S. W. (2003) .Corporate Governance and Firm Profitability: Evidence from Korea Before the Economic Crisis. Journal of Financial Economics, 68: 287-322.
Kumar, J. (2008). Does Ownership Structure influence Firm Value: Evidence from India. Working Paper; Indira Gandhi Research Institute, New Delhi.
Lemmon, M. & Lins, K. V. (2003). Ownership Structure, Corporate Governance, and Firm Value: Evidence from the South East Asian Financial Crisis. Journal of Financial Economics, 58: 1445-1468.
Liu, G. S., & Sun, P. (2003). Identifying Ultimate Controlling Shareholders in Chinese Public Corporations: An Empirical Survey. Working Paper no. 1, Asia Programme.
Mak, Y. T., & Kusnadi, Y. (2005). Size really matters: Further evidence on the negative relationship between Board Size and Firm Value. Pacific Basin Finance Journal, 13: 301-318.
McConnell, J. J., & Servaes, H. (1990). Additional Evidence on Equity Ownership and Corporate Value. Journal of Financial Economics, 27: 595-612.
Morck, R., Shleifer, A., & Vishny, R. (1988). Management Ownership and Market Valuation: An Empirical Analysis, Journal of Financial Economics, 20: 293-315.
Samad, A. F. (2002). Ownership Structure in the Malaysian Corporate Sector: Its Impact on Corporate Governance, Performance, Financing, and Investment Patterns. Working Paper; University of Manchester.
Sarkar, J., & Sarkar, S. (2000). Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India. International Review of Finance, 1: 161-194.
Short, H. & Keasey, K. (1997). Institutional Shareholders and Corporate Governance, in K. Keasey and M. Wright (eds.), Corporate Governance, John Wiley & Sons.
Short, H., & Keasey, K. (1999). Managerial Ownership and the Performance of Firms: Evidence from the UK. Journal of Corporate Finance, 5: 79-101.
Tam, K., and Tan, M.G. (2007) Ownership, Governance and Firm Performance in Malaysia. Corporate Governance and International Review, 15(2): 208-222.
Tobin, J. (1969) A General Equilibrium Approach to Monetary Theory. Journal of Money Credit and Banking, 1:15-29.
Xu, X., and Wang, Y. (1999) Ownership Structure and Corporate Governance in Chinese Stock Companies. China Economic Review, 10: 75-98.
Yeh, Y. H., Lee T.S., and Woidtke, T. (2001) Family Control and Corporate Governance: Evidence from Taiwan. International Review of Finance, 2: 21-48
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License (Creative Commons Attribution License 3.0 - CC BY 3.0) that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
email@example.com, www.iseic.cz, ojs.journals.cz